Growing Evidence That The Upturn Is Upon Us
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I would argue that the whole credit crunch is as a result of rising oil prices. The first suburbs of cities in the US that experienced large drops in home prices were the most sprawly ones furthest from the downtown core. The same trend applies to whole cities. Mortgages defaulted and bad debts rose, thus causing the credit crunch.
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Anyone who thinks that "high oil price = credit crunch = global downturn" needs to take a lesson in economics. I don't particularly endorse the manner in which the four horsemen of the apocalypse have ridden into this thread, but their description of how things have happened is accurate.
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...four horsemen of the apocalypse have ridden into this thread
Everynow and then on PPRuNe someone comes out with something that really makes me laugh...
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Originally Posted by rogerg
Sometimes you just have to be optimistic and take a chance.
Everyone is entitled to their opinion; mine is that it'd be foolish to stake so much on an integrated course right now. If integrated is for you, give it a year or so and see how things pan out in the industry.
Originally Posted by v6g
I would argue that the whole credit crunch is as a result of rising oil prices.
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Grass strip - believe me im not ignoring the threat of a looming recession, and of course people having less money will = less passengers. Im just pointing out that main factor that has really hurt the airlines SO FAR in this current crisis is oil prices, not the credit crunch/recession.
To the guy who thinks oil caused the credit crisis, that is not the case at all. If anything the credit crisis has contributed to higher oil prices, as the dollar lost value investors stopped buying dollars and bought commodities instead as a hedge. Thus as the euro loses value and the dollar gains, the price of oil has dropped in recent weeks (just one of the reasons its dropped).
To the guy who thinks oil caused the credit crisis, that is not the case at all. If anything the credit crisis has contributed to higher oil prices, as the dollar lost value investors stopped buying dollars and bought commodities instead as a hedge. Thus as the euro loses value and the dollar gains, the price of oil has dropped in recent weeks (just one of the reasons its dropped).
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What caused the credit crisis? Risky US consumers defaulting on their mortgages.
So what caused them to default on these loans? Well, the mortgages resetting to higher interest rates is one cause. But, the distribution of risky loans is uniform across American cities & neighborhoods. What was not uniformly distributed across neighborhoods was where the foreclosures began and where the steepest declines have taken place. The outer fringes of the exurbs were where the trouble started, then the suburbs - I wonder why? Far steeper declines have also been observed in the more sprawly US cities with little to no transit whereas areas close to central urban cores and cities with extensive transit have registered much lighter declines.
The oil price rise has been a gradual rise over the last several years, not a sudden 9-10 month thing. I'm not saying that the oil price is solely to blame for the current crisis but it's played a greater role than many people seem to believe. Risky mortgagors would have defaulted either way, but a major first trigger and the accelerant was the oil price.
So what caused them to default on these loans? Well, the mortgages resetting to higher interest rates is one cause. But, the distribution of risky loans is uniform across American cities & neighborhoods. What was not uniformly distributed across neighborhoods was where the foreclosures began and where the steepest declines have taken place. The outer fringes of the exurbs were where the trouble started, then the suburbs - I wonder why? Far steeper declines have also been observed in the more sprawly US cities with little to no transit whereas areas close to central urban cores and cities with extensive transit have registered much lighter declines.
The oil price rise has been a gradual rise over the last several years, not a sudden 9-10 month thing. I'm not saying that the oil price is solely to blame for the current crisis but it's played a greater role than many people seem to believe. Risky mortgagors would have defaulted either way, but a major first trigger and the accelerant was the oil price.
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Looks like a positive day for BA and Thomas Cook, with a further fall in oil price -
The Press Association: Oil price slide boosts FTSE
(and no I dont suggest starting flying training before some bull in a china shop tries to bowl me over!). just reporting some positive news....
The Press Association: Oil price slide boosts FTSE
(and no I dont suggest starting flying training before some bull in a china shop tries to bowl me over!). just reporting some positive news....
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Drunk!!!
Well, its a friday night and as usual i'm less than sober. I should be saving the beer money towards PA28 time really but who cares atm?
My oppinion (in a less than sober state!);
THE CREDIT CRUNCH: Caused by banks over eager to lend out money they dont have in an attemt to increase proffits that they barely have. Lending to those that are far from credibble (or credittable).
OIL PRICES: Well we all have our vices, Oil is the fuel of the past. They are starting to realise this now, Lets face it, what does the middle east have if you take away the world oil dependancy? Not a lot is the answer! Once the world economy is green, the middle east will have no economy, what they fail to realise is that by raising the price they have speeded up there own demise.
THE AIRLINE RECRUITMENT FREEZE: This will end, and in my oppinion sooner rather than later. People like holidays. In this day in age it will be one of then last things to go. Charters are fine, the big guns will be fine, the loco's will suffer the worst. Big guns live off business, charters live off the family hol, loco's live off the the tripper. The guy with a few spare pound in the bank. The guy that is becoming rare. BUT this will change, there is a place for the loco now as there always will be. Cheap flights are hear to stay and they arent going anywhere.
I could go on forever but i fear i may sober up and my bed is calling, feel free to flame me, it will only add to my amusement in the morning,
Paz
My oppinion (in a less than sober state!);
THE CREDIT CRUNCH: Caused by banks over eager to lend out money they dont have in an attemt to increase proffits that they barely have. Lending to those that are far from credibble (or credittable).
OIL PRICES: Well we all have our vices, Oil is the fuel of the past. They are starting to realise this now, Lets face it, what does the middle east have if you take away the world oil dependancy? Not a lot is the answer! Once the world economy is green, the middle east will have no economy, what they fail to realise is that by raising the price they have speeded up there own demise.
THE AIRLINE RECRUITMENT FREEZE: This will end, and in my oppinion sooner rather than later. People like holidays. In this day in age it will be one of then last things to go. Charters are fine, the big guns will be fine, the loco's will suffer the worst. Big guns live off business, charters live off the family hol, loco's live off the the tripper. The guy with a few spare pound in the bank. The guy that is becoming rare. BUT this will change, there is a place for the loco now as there always will be. Cheap flights are hear to stay and they arent going anywhere.
I could go on forever but i fear i may sober up and my bed is calling, feel free to flame me, it will only add to my amusement in the morning,
Paz
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I have to agree with those who think the crunch is due to factors other than oil. Banks have recently been selling increasingly dodgy products to increasingly risky punters. Case in point is Northern Rock. A lot of their problems came from unchecked sales made by individuals with their eye on the bonus they'd make from said sale. Up until a few months ago you could get an instant online approval for a loan!
Now the banks are all sh1tt1ng themselves 'cos they've realised that lots of people can't/ won't make the payments now that they've spent all the money they realised from their refinancing. So no-ones lending, so no-ones spending, and so the fun begins...
I can't claim to make any sense of why the oil prices have rocketed recently, I read somewhere that it might have something to do with the futures market? Whatever the cause, a 1/3 rise in prices at the pumps is just the icing on the cake for the punter in the street whose remortgage cash has just run out, whose house value is dropping, and who is seeing food and utility costs going up at what has recently been a ridiculous rate.
Having said all of that, the week in the sun may well be one of the last things to go, 'cos in the modern idiom stuff like that is viewed as a necessity by many, rather than luxury.
To be fair though, I don't think anyone can accurately predict what the near future holds economically. I like to think (or is that hope?) that the fact that the BoE is run by people who actually know about money, rather than an elected official with their eye on the vote, might help smooth things a bit this time round
Now the banks are all sh1tt1ng themselves 'cos they've realised that lots of people can't/ won't make the payments now that they've spent all the money they realised from their refinancing. So no-ones lending, so no-ones spending, and so the fun begins...
I can't claim to make any sense of why the oil prices have rocketed recently, I read somewhere that it might have something to do with the futures market? Whatever the cause, a 1/3 rise in prices at the pumps is just the icing on the cake for the punter in the street whose remortgage cash has just run out, whose house value is dropping, and who is seeing food and utility costs going up at what has recently been a ridiculous rate.
Having said all of that, the week in the sun may well be one of the last things to go, 'cos in the modern idiom stuff like that is viewed as a necessity by many, rather than luxury.
To be fair though, I don't think anyone can accurately predict what the near future holds economically. I like to think (or is that hope?) that the fact that the BoE is run by people who actually know about money, rather than an elected official with their eye on the vote, might help smooth things a bit this time round
Stop obsessing about the oil price. Its a red herring. The real issue is outlined by Albert Edwards, chief strategist at Société Générale speaking this week:
"We see a deep global recession. Growth prospects in the Eurozone, Japan and the UK have deteriorated. Most now accept that recession has already begun in all three,". Mr Edwards predicted a "collapse" in emerging markets next. "You ain't seen nothing yet," he said.
America sneezes.... this time we get bird flu.
WWW
"We see a deep global recession. Growth prospects in the Eurozone, Japan and the UK have deteriorated. Most now accept that recession has already begun in all three,". Mr Edwards predicted a "collapse" in emerging markets next. "You ain't seen nothing yet," he said.
America sneezes.... this time we get bird flu.
WWW
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Stop obsessing about the oil price. Its a red herring. The real issue is outlined by Albert Edwards, chief strategist at Société Générale speaking this week:
"We see a deep global recession. Growth prospects in the Eurozone, Japan and the UK have deteriorated. Most now accept that recession has already begun in all three,". Mr Edwards predicted a "collapse" in emerging markets next. "You ain't seen nothing yet," he said.
"We see a deep global recession. Growth prospects in the Eurozone, Japan and the UK have deteriorated. Most now accept that recession has already begun in all three,". Mr Edwards predicted a "collapse" in emerging markets next. "You ain't seen nothing yet," he said.
It's what created this slowdown.
Consumers saw prices of anything go up because of high oil prices while the usual result of a credit crunch is a reduction in prices and a deflation.
The problem in the U.S. is that while there was deflation, prices went up creating a huge price crisis.
Forecasting the future is very difficult and many top analysts have been wrong many times in the past.
Your data on Japan is inaccurate.
Japan has recorded a GDP growth of 3.3% in Q1.
Q2 is expexted to reduce to around 2% which is still very far from recession.
All you're trying to do is to reach the "see, I was right" level based on raw prophecies by "top managers". So far you have been proven wrong with traffic and capacity growth at airlines all over Europe.
You said that people were going to stop travelling this summer according to your prognoses WWW.
You have been so wrong:
The Association of European Airlines has released traffic and capacity data for its members in June 2008.
Following a better-than-expected set of results in May, the June figures more clearly reflected the depressed situation of the market. Year-on-year traffic growth slowed to 1.6% which, coupled with a 4.0% increase in capacity, led to a substantial fall in load factor, by 1.9 percentage points to 77.4%.
Decreases were recorded in Domestic operations (-6.7%) and on the North Atlantic (- 0.2%). The normally buoyant European cross-border markets grew by 3.2% and Europe-Far East by just 0.5%. Regions which continued to post strong growth were the South Atlantic – which, at plus 10.3% nevertheless suffered a heavy loss in load factor – and the Middle East, with +6.9%.
Preliminary results for July, based on weekly reports, indicate a growth figure perhaps a percentage point better than in June, driven by a slight recovery in North Atlantic and Far Eastern flows, although both remain substantially depressed. Load factors are expected to show a further decline, although less dramatic than in June.
There's a traffic growth of 1.6% and airlines have been adding 4% capacity compared to the same month last year.
Airlines are adding capacity faster than their traffic is growing, lowering load factors and potentially lowering airline earnings (unfortunately we don't have yield figures and airlines have been charging higher fares, so we can't really judge on that).
What is the real indicator of pilot jobs?
Capacity increases.
For European ab-initio's the capacity increases on European routes are the most representative of new pilot jobs. The capacity growth was 2.8% in June on European routes, which means that supposing that there's 10 000 pilots flying these routes already, in June alone a rough 2.8% or 280 new ab-initio's had been hired to cope with the capacity increases. (Supposing that average seating of aircraft added compared to average seating of aircraft already flying the routes is similar or equal plus equal or similar aircraft utilisation (km flown/month)).
You have predicted capacity reductions, traffic reductions over the summer but you have been proven wrong. Face it, admit it and stop pretending you know everything.
Do that in the cockpit with your submissive first officer about knowledge on F-coms or operating procedures, but you can't do that on the complicated subject that is economic forecasts on an internet forum.
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See the reality
I'd like to come back to a couple of posts posted on pages 19 and 20 of the downturn thread in April:
By myself:
By member Adios:
What do we learn from this:
US Airways
LCC: Summary for US AIRWAYS GROUP INC - Yahoo! Finance
Continental
CAL: Summary for CONTL AIRLINES CL B - Yahoo! Finance
United
UAUA: Summary for UAL CORP NEW - Yahoo! Finance
Jet Blue
JBLU: Summary for JETBLUE AIRWAYS CP - Yahoo! Finance
Northwest
NWA: Summary for NORTHWEST AIRLINE - Yahoo! Finance
Very strangely, all graphs decline until mid-July, start increasing after that... all at the same time... I wonder why that is...
Oil is at 113$ and will probably be at 90$ by end of the year.
I think that this is it.
By myself:
The people presiding now are stacking as much money as they can buying stocks at bottom prices, etc. using this money.
Nich-av,
It seems you may be onto something there. Maybe some of us can use the info you have provided to make a killing in the markets. I'd love to buy a NetJets share; I'm sick of waiting in BAA's long security queues. There are probably many other readers who would love to fund their flight training with a few hot tips. Where could I put £100K to quickly turn it into £200K? If I can turn it over a few times in quick succession, I should have enough for a Citation Bravo share in a year or so and the guys in Ferrovial can kiss my rosy red goodbye one last time.
It seems you may be onto something there. Maybe some of us can use the info you have provided to make a killing in the markets. I'd love to buy a NetJets share; I'm sick of waiting in BAA's long security queues. There are probably many other readers who would love to fund their flight training with a few hot tips. Where could I put £100K to quickly turn it into £200K? If I can turn it over a few times in quick succession, I should have enough for a Citation Bravo share in a year or so and the guys in Ferrovial can kiss my rosy red goodbye one last time.
US Airways
LCC: Summary for US AIRWAYS GROUP INC - Yahoo! Finance
Continental
CAL: Summary for CONTL AIRLINES CL B - Yahoo! Finance
United
UAUA: Summary for UAL CORP NEW - Yahoo! Finance
Jet Blue
JBLU: Summary for JETBLUE AIRWAYS CP - Yahoo! Finance
Northwest
NWA: Summary for NORTHWEST AIRLINE - Yahoo! Finance
Very strangely, all graphs decline until mid-July, start increasing after that... all at the same time... I wonder why that is...
Oil is at 113$ and will probably be at 90$ by end of the year.
I think that this is it.
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Philpaz, yes sir all boozed up on a Friday night I like it 
With regards to the oil price I must agree that it's a distraction because whilst you have an income you at least have the option of absorbing higher costs. Whereas once that income stops you cannot absorb anything at any price because you're broke. Unlike recessions from yesteryear this time round we have (what the govrenment and their cheerleaders in the media i.e. BBC refuse to acknolwedge) is a large debt that will will require feeding whether you have a job or not. "Lift may reduce but the weight remains the same", same with income/debt, oh dear.
Nevertheless it's always good to have a helping hand i.e. recent/temporary oil price in any regard to the economy but the overall picture is still one of a burnied out shell. The same shallow idiots who seem to vote in politicians who have no policies but a nice smile and relatbale personality are the same brigade who have gone out and built up this huge mountain of debt and with the silly IVAs the government has happily introduced those people are going to be lining up to shirk their responsibilities which the remaining consumers are going to have to bear. It's a nasty one that 's agreed but no one really knows how deep or bad.
A quick word of caution on the over reliance of a banker's comment they always have a hidden agenda/interest for making certain statements. They are not here to provide public information or short films on how to spend wisely they are only about themselves at this time in the economic cycle and always. This is evident in the plethora of contradicting messages from bankers around the globe that offer different opinions to varying degrees from each other. Therefore don't hedge all your bets on one chap, remember these are the people primarily responsible for this whole mess. It's like asking a murderer how the police investigation is going ....
With regards to the oil price I must agree that it's a distraction because whilst you have an income you at least have the option of absorbing higher costs. Whereas once that income stops you cannot absorb anything at any price because you're broke. Unlike recessions from yesteryear this time round we have (what the govrenment and their cheerleaders in the media i.e. BBC refuse to acknolwedge) is a large debt that will will require feeding whether you have a job or not. "Lift may reduce but the weight remains the same", same with income/debt, oh dear.
Nevertheless it's always good to have a helping hand i.e. recent/temporary oil price in any regard to the economy but the overall picture is still one of a burnied out shell. The same shallow idiots who seem to vote in politicians who have no policies but a nice smile and relatbale personality are the same brigade who have gone out and built up this huge mountain of debt and with the silly IVAs the government has happily introduced those people are going to be lining up to shirk their responsibilities which the remaining consumers are going to have to bear. It's a nasty one that 's agreed but no one really knows how deep or bad.
A quick word of caution on the over reliance of a banker's comment they always have a hidden agenda/interest for making certain statements. They are not here to provide public information or short films on how to spend wisely they are only about themselves at this time in the economic cycle and always. This is evident in the plethora of contradicting messages from bankers around the globe that offer different opinions to varying degrees from each other. Therefore don't hedge all your bets on one chap, remember these are the people primarily responsible for this whole mess. It's like asking a murderer how the police investigation is going ....
PPRuNe Handmaiden
Well, I've been busy. 
With the pound down to 1.87 to the dollar those $ barrels of oil will be getting more expensive in £ terms.
Anyway, as I said, oil prices are the sideshow. The main event is the Recession in the US, the one just starting in Japan and the one the EU will be in next year. The marginal cost of kerosene means nothing is people aren't travelling at any any price.
WWW
Anyway, as I said, oil prices are the sideshow. The main event is the Recession in the US, the one just starting in Japan and the one the EU will be in next year. The marginal cost of kerosene means nothing is people aren't travelling at any any price.
WWW
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WWW not too long ago, you explained that airlines cant operate in high oil prices,now that you can clearly see that oil prices are going south,you have changed goal posts and now recession is the problem .Lets compare notes in a year.....If you are right i will give you my savings to gamble with.
You think oil at circa $115 a barrel ISN'T high? High oil prices are crippling many airlines. That has not changed. Its doubled and then come back 20%. I wouldn't call a one month movement a heading myself.
My point is that a narrow focus on oil price is a mistake. As a component of a ticket it is usually less than half the cost. It is not price elasticity that will prove the real crisis - its people not paying any price, high or low, because their behaviour has changed due to a recession.
If oil fell tomorrow to $50 a barrel the economy would still be headed for recession as the biggest credit bubble in history unwinds. The recession will lead to less business and leisure travel and this will see the usual patterns of airline failures. Oil is just an added irritant to an underlying serious condition.
Globally its not a bad time to be a Wannabe. In the Western World its about to become a terrible time to be a Wannabe. Especially a Wannabe in high debt.
WWW
My point is that a narrow focus on oil price is a mistake. As a component of a ticket it is usually less than half the cost. It is not price elasticity that will prove the real crisis - its people not paying any price, high or low, because their behaviour has changed due to a recession.
If oil fell tomorrow to $50 a barrel the economy would still be headed for recession as the biggest credit bubble in history unwinds. The recession will lead to less business and leisure travel and this will see the usual patterns of airline failures. Oil is just an added irritant to an underlying serious condition.
Globally its not a bad time to be a Wannabe. In the Western World its about to become a terrible time to be a Wannabe. Especially a Wannabe in high debt.
WWW
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I get confused about all this worry of recession... In Australia, I haven't yet begun my PPL OR CPL OR FI training and I've been offered a job as an instructor as soon as I complete them.
It seems there is not enough instructors in Australia, and for those willing to gain a FI rating, they're virtually not only guaranteed employment, but have a pick of who they'd like to work for.
I guess the problems of lack-of-jobs / unhealthy-economy only arises when pilots aren't willing to take a bottom of the ladder job to get a foot in the door..?
Jazz
It seems there is not enough instructors in Australia, and for those willing to gain a FI rating, they're virtually not only guaranteed employment, but have a pick of who they'd like to work for.
I guess the problems of lack-of-jobs / unhealthy-economy only arises when pilots aren't willing to take a bottom of the ladder job to get a foot in the door..?
Jazz